To address the market’s need for low-carbon fuels, in 2021, S&P Global Commodity Insights, the leading independent provider of information and Platts benchmark prices for the commodities and energy markets, and Xpansiv, the global marketplace for ESG commodities, together launched a daily price benchmark for methane performance in natural gas production in the United States.
The certificates represent avoided methane emissions from the production of a specific volume of natural gas in the contiguous US and Canada. Methane Performance Certificates (MPCs) allow a U.S. producer to sell instruments representing zero-methane emission natural-gas production. The Methane Performance Certificates are represented in dollars per MPC ($/MPC) and dollars per metric ton of carbon dioxide equivalent ($/mtCO2e), offering greater transparency to this new market. MPC prices were assessed on March 29th at 3.8 cents/MPC, which converts to $6.13/mtCO2e.
MPCs provide a tradeable instrument for achieving a lower intensity, unlocking the market value of reducing the impact of gas production. Each MPC represents 1 MMBtu (million British thermal units) of gas produced with zero-methane emissions. The new MPC assessment reflects bids, offers, and transactions in the open market, including data from exchanges, as well as information heard in the over-the-counter market. According to Keri Burke, editor of low-carbon gas for S&P Global Commodity Insights, pricing for these methane performance certificates was set using the “Platts Threshold” of 0.1% methane intensity. Under that threshold, approximately one-half of current U.S. natural gas production would qualify for MPCs.
Approximately half of U.S. natural gas production falls under the Platts Methane Emissions Threshold of 0.1% methane intensity, which would qualify that production as lower-methane intensity resources under the methane performance certificates, according to S&P Global Platts.
To participate in MPC assessments, natural gas producers will be required to have continuous monitoring systems in place at all production sites and across their midstream transportation systems, Burke said. To assure methane performance reporting accuracy, all monitored production will be verified by an independent, third-party resource, she said.
“These certificates are traded separately from the physical natural gas and provide a way for market participants to generate capital through lower-methane intensity from their natural gas production,” said Burke. “Through interaction with the market, we have socialized the concept of methane performance certificates, and the market has responded saying there is a need for a product like this. MPCs will allow companies the opportunity to monetize efforts to reduce their methane emissions while bringing transparency to the carbon market.”
